Commercial Agency Setup in the UAE

Overview

In 2023, the UAE overhauled its decades-old agency regime. Federal Law No. 3 of 2022 (Commercial Agency Law) replaced the old 1981 code and establishes a more balanced framework for agency relationships. The new law defines “Commercial Agency” broadly – any written agreement under which a UAE-based agent sells or distributes a principal’s goods or services for commission within a specified territory. Importantly, an agency is valid only if registered with the Ministry of Economy (MoE). Unregistered agreements carry no legal protection in the UAE. Overall, the updated law aims to modernize the sector – expanding who can act as an agent and giving principals more flexibility to end contracts, while still protecting agents’ rights.

Who Can Be a Commercial Agent?

Under the new law, agency activities remain primarily reserved for UAE nationals or UAE-owned entities. Eligible agents include:

• UAE nationals (individuals) — the primary eligible category.
• Fully UAE-owned companies (owned by UAE natural persons or government entities).
• Public Joint-Stock Companies (PJSCs) — permitted if incorporated in the UAE and ≥51% UAE national shareholding, subject to Cabinet approval.
• Foreign principals (narrow exception) — a foreign company may act as its own agent only in exceptional, Cabinet-approved circumstances where no UAE agent previously existed for the product and the agency is newly registered.

Registration Process and Documentation

To set up a valid commercial agency, the parties must register the agency contract with the MoE’s Commercial Agencies Register. The basic procedure is:

• Prepare the agreement: Draft a written agency contract specifying the scope of products/services and the exclusive territory (one or more Emirates) for the agent. (Exclusivity is a legal requirement for a “commercial agency” under the law.)
• Assemble documents: Assemble all required documents, including the agent’s valid trade license and a certified (notarized and legalized) copy of the agency agreement.
• Submit to MoE: File the application with the Ministry of Economy. This is done through the MoE’s Commercial Agencies Register portal or office.
• Approval timeline: The MoE must issue a decision within 10 working days of a complete submission. If approved, the agency is entered into the official register. If the MoE rejects the application, the parties have 60 days to appeal to the UAE courts.

Until this formal registration is granted, the “agency” has no legal effect. In other words, operating an unregistered agency is prohibited. Once registered, the agent gains statutory protections (exclusivity, compensation rights, etc.) under the Commercial Agency Law.

Key Contractual Features

• Exclusivity & Territory: Mandatory for agency status. Define Emirate(s) precisely to avoid parallel imports or enforcement disputes.
• Commission & Trigger Events: Specify rates and whether commissions apply to sales by principal, sub-distributors, or imports into the territory. The law protects the agent’s right to commission on covered sales.
• Term & Renewal: If the agent must invest in showrooms/after-sales facilities, expect a default or market practice of longer terms (the law contemplates five-year investments). State renewal mechanics and a practical timetable for notice.
• Notice & Early Exit: Draft notice, cure periods and remedies carefully. Parties may agree waivers on compensation on natural expiry, but waivers must be explicit.
• Amendment Protocol: Any addition of products or territory requires contract amendment and re-registration with MoE.

Termination, compensation & dispute resolution

• Notice: Termination or non-renewal requires compliance with statutory notice mechanics (commonly at least one year’s written notice or notice before half the remaining term—ensure your contract mirrors/statutorily complies with these rules).
• Compensation: Agents may claim fair compensation for proven investment-related losses or loss of future profits unless they validly waive such rights on expiry. Maintain documentary proof of investments and market development costs.
• Continuity during disputes: MoE can permit temporary imports/distribution to avoid market disruption during dispute resolution, subject to later compensation.
• Forum: Disputes are first directed to the Commercial Agencies Committee (CAC); CAC decisions may be appealed to UAE courts. Crucially, arbitration clauses are now valid under the new law — parties can choose arbitration (domestic or agreed foreign seat) for final resolution.

How HLS-Global UAE Can Assist

Our team specializes in UAE commercial agency law. We provide end-to-end support, including:

• Structuring and Drafting: Advising on the optimal agency structure (exclusive vs. non-exclusive) and drafting/registering compliant contracts that reflect both the law and your business goals.
• Registration Services: Preparing and submitting the registration dossier to the Ministry of Economy, and following up until the agency is approved.
• Negotiation Support: Assisting principals and agents in negotiating balanced terms – e.g. territorial scope, duration, commission rates, and exit clauses – in light of the new law.
• Termination Strategies: Counseling on lawful termination or non-renewal (including timing notice) to minimize the risk of disputes or compensation claims.
• Ongoing Compliance: Providing updates and audit checks to ensure the agency remains fully compliant (e.g. re-registration after changes, meeting nationality rules, etc.).

The New Commercial Agency Law delivers clarity and new options — but registration, precision in drafting and disciplined record-keeping are non-negotiable. Get structure and registration right from day one to preserve market access and avoid costly disputes.

Contact HLS-Global UAE for a practical, end-to-end commercial agency setup and compliance programme.

info@hls-global.ae | +971562318810